1. Metropolitan Council Environmental Services A Clean Water Agency Presented to the Environment Committee August 24, 2010 Capital Finance Plan Jason Willett, ES Finance Director

2. Capital Improvement Plan 2011-2016 Capital Spending Total projected spending: $579 million (reduced 23% from prior CIP) (millions) 2

3. Capital Spending History and projections (millions) Adjusted to 2010 $s 1991-2009 Actual, 2010 Estimated, 2011-2016 Projected CIP CIP 3

4. CIP Comparison Next 6 years: 97 114 Last 10 years:109 129 Last 40 years: 62 117 Average Annual Capital Spending: $M 2010 $M 4

5. Sources of Capital Funding 1.PFA Loans 2.Council Bonds 3.Pay-as-you-go 4.Grants 5.Local Financing (CVC & Cost Sharing) 5

6. (millions) Actual through 2009, projected thereafter PFA Loans (Actual and Projected) Projected 6

7. PFA Clean Water State Revolving Loan Program 19 wastewater loan agreements 1989-2009 totaling $1.1 billion Interest rates from 2.54% to 6.42% (2009 BAB loan rate was 1.84% after federal rebate) PFA normally offers below market interest rates (150 basis points or 1.5% for $50M borrowed) PFA pays underwriters’ discount (Council pays none) Council pays limited costs of issuance 7

8. Impact of Typical PFA Subsidy Typical $50 million loan Total DebtPresent ServiceValue 4.0% Council bond$73.6$50.0 2.5% PFA loan64.143.6 Savings to ratepayers$9.5$6.4 Bond underwriters discount$0.5 Cost of issuance saved$0.1 Total Present Value Savings$7.0 ($ millions) 8

9. PFA 2010 Refunding PFA recently refunded 5 bonds for present value savings of $19.8 million Part of bond proceeds was used for 5 MCES loans Negotiated loan agreements provide that MCES gets a portion of savings Savings to Council is $5.5 million present value PFA will pay savings to Council by crediting debt service payments: — $2.4M in 2010 — $2.4M in 2011 — $0.9M in 2012 9

10. (millions) Actual through 2010, projected thereafter Projected 10 Council Wastewater Bonds Actual & Projected

11. Council 2010 Refunding PFA’s 1996 $40 million loan to Council had $16 million of principal remaining Council issued G.O. bonds to refund this PFA loan in February 2010 Original interest rate of 3.8% reduced to 1.2% Total present value savings of $1.58 million was achieved; half ($790,883) credited to PFA 11

12. (millions) SAC (Service Availability Charge)CRF (Capital Revolving Fund) Favorable VarianceAnnual Budget Pay-As-You-Go Projected 12

13. Grants ARRA: $8.2 million in 2009 State Phosphorus: $0.5 million in 2009- 2010 13

14. Current Value Credits (CVCs) CVCs are payments to local governments for wastewater facilities Council assumed ownership of, per MN Statute 473.511 Balances owed after 7/1/10 payment: — Mendota Heights $131,878 — New Brighton $367,204 — Shoreview$13,360 — TOTAL $512,442 2016 is last year for payment of CVCs 4.0% interest is paid on this debt Existing CVC may be paid off: Council action pending 14

15. Brooklyn Elko New Maple Lakeville Park Market* Plymouth Grove Total 2010 $173 $123 $462 $78 $836 2011 $123 $18 $141 2012 $123 $18 $141 $ in thousands Cost Sharing 15 * $239,000 to be repaid over 20 years at 4.07% interest ($17,695/year).

16. Summary Information Summary of MCES Capital Finance Plan Debt Service and Debt Outstanding Comparative Data Conclusions 16

17. Pre-funded Debt Service In prior years, some operating funds were transferred to a Debt Service Reserve Fund Balance of $6.5 million at year-end 2009 Fund not allowed to drop below 5% of annual debt service, which is currently $4.5 million 17

18. DebtExistingPre-fundedBudgeted Service CVCs D.S.D.S.Increase 201090.0.1 2.092.11.8% 201192.4.1 092.5.4% 201294.9.1 095.02.7% 201398.9.1 099.04.2% 2014 105.4.1(1.5)104.05.1% 2015112.4.1 (1.5) 111.0 6.7% 2016 119.4.1 (1.5) 118.0 6.3% ($ millions) Debt Service Adjustments 18

19. Budgeted Debt Service 2001-2009 Actual Debt Service, projected thereafter 2010 Debt Service with 3% inflation (2010 dollars) History and projections (millions) Projected 19

20. As a percent of annual budget* *Includes portion of debt service paid by SAC transfer; assumes O&M portion of budget increases 3% per year. Debt Service Projections 20

21. Cincinnati37% Cleveland40% Phoenix40% Honolulu 41% Detroit44% MCES 44% Columbus48% Sacramento52% Austin53% Debt Service as a % of budget* *2007 data from 2008 NACWA survey Washington, DC 19% Rochester, NY21% Kansas City25% Denver26% Chicago30% Memphis 32% Philadelphia 33% Indianapolis34% San Diego37% Milwaukee54% Trinity River TX 55% Nashville58% King County WA58% Louisville KY58% New York61% Miami70% Peer Agencies 21

22. Outstanding Debt Wastewater Council Bonds PFA Loans $946 $958 $991 $1042$1041$1035 2008 and 2009 are actual; other years projected $1035 22 (millions) $993 $1024

23. San Diego $43 Denver$79 Memphis$139 Chicago$279 Kansas City$283 MCES$343 Phoenix$354 Dallas/Ft Worth$415 Washington, DC$480 Debt per capita (person)* *2007 data from 2008 NACWA survey Philadelphia$530 Cleveland$543 Milwaukee$725 Miami$734 Detroit$738 Nashville $768 Cincinnati$789 Austin$1,085 Sacramento$1,154 New York$1,287 Columbus $1,572 Seattle$1,593 Honolulu$1,861 Louisville$1,872 Peer Agencies 23

24. Conclusions Financing load is reasonable Projected next financings needed: — $50M-$70M PFA loan late 2010 — $45M Council bonds late 2010 or early 2011 PFA subsidies are important Continued financing needs mean Council’s “Aaa” bond rating and G.O. backing also very important 24

25. Next Steps Today:Committee information & discussion Sept-Oct:Council approves preliminary unified capital budget, authorized capital program and CIP (including Capital Financing Plan) November:Public hearing December:Council adoption 25